Extracted text: (b) The ABC Puzzle company currently applies the straight-line depreciation method for a delivery truck that was purchased for €100,000 in on 1 Mar 2020 (useful life salvage value €10,000). Your supervisor of the accounting department asks you to review the adopted accounting policy for the truck. In particular, he wants to know whether it would have been more reasonable for ABC company to adopt the units-of activity method instead, given that the ABC company wants to show a high net income in 2020. Assume that the delivery truck has €0,45 depreciable cost per mile and that miles will be driven as years, shown below: 60,000 miles 50,000 miles 40,000 miles 30,000 miles 20,000 miles 200,000 miles 2020 2021 2022 2023 2024 Total Calculate and compare the depreciation schedules for the straight-line and units-of-activity method over the entire useful life of the truck.
Extracted text: 2 of 4 Question 1 The ABC Puzzle company is a merchandising company that buys and sells puzzles. The company's end of 2020 Unadjusted- and Adjusted Trial Balances are as shown below. You have recently joined the ABC Puzzle's accounting department. Your supervisor asks you to take a closer look at the prepared Trial Balances before they are presented to the CFO. 1 31 Dec 2020 Unadjusted Trial Balance Adjusting Entries Adjusted Trial Balance Accounts Debit Credit Debit Credit Debit Credit Cash € 120,000 € 120,000 Accounts Receivable 100,000 100,000 Notes Receivable 15,000 15,000 Interest Receivable € 1,500 1,500 Merchandise Inventory 130,000 130,000 Prepaid Insurance 2,000 € 1,000 1,000 Land 70,000 70,000 Buildings & Equipment Accumulated Depreciation 350,000 350,000 € 115,000 45,000 € 160,000 Accounts Payable Notes payable Salaries Payable Interest Payable Dividends Payable Bond payables 180,000 180,000 25,000 25,000 15,000 15,000 1,200 1,200 20,000 20,000 100,000 100,000 Common stock (=Ordinary Share Capital) Additional Paid-in Capital (=Share Premium) Retained Earnings 180,000 180,000 30,000 30,000 40,000 40,000 Sales Revenue 600,000 600,000 Interest Revenue 1,500 1,500 Rent Revenue 10,000 10,000 Cost of Goods Sold 408,000 408,000 Advertising Expense Salaries Expense 20,000 20,000 80,000 15,000 95,000 Interest Expense 5,000 1,200 6,200 Insurance Expense 1,000 1,000 Depreciation Expense 45,000 45,000 Totals 1,300,000 1,300,000 63,700 63,700 1,362,700 1,362,700